A British security firm has welcomed the outcome of a US army investigation clearing it of criminal offences.

The US military launched an inquiry after a video showing an Aegis Defence Services contractor firing at civilian cars in Iraq was shown on the internet.

Ageis, which has a Pentagon contract in Iraq said to be worth £157m, said the film had been edited to mislead.

It said the man responsible for the film is now the subject of legal action.

Aegis said its own investigation, which was handed to the US Army's Criminal Investigation Division, had found that the incident shown on the film was within the rules on the use of force by civilian personnel.

The company says its rules of engagement "allow for a structured escalation of force to include opening fire on civilian vehicles under certain circumstances".

In the film, a man is seen leaning out of a speeding car with a machine gun, firing wildly at following civilian vehicles on a highway, hitting some of them.

The footage was posted on a website in November 2005 set up by contractors, but was eventually seen by a wider audience.

The US military investigation concluded that no-one should be charged with any criminal offence.

An Aegis spokesman said: "There was no evidence of any civilian casualties as a result of the incidents and the images published were all taken out of context."

Aegis head, Colonel Tim Spicer, said that it was "regrettable" that the contractor who filmed the event had "brought into question the high standards of behaviour achieved by our team in Iraq".

Its remit includes the protection of civilians and soldiers travelling in Iraq.